UPDATE 1-Molson Coors to make cannabis-based drinks in Canada

Aug 1 (Reuters) - Molson Coors Brewing Co’s Canadian arm will make cannabis-infused drinks along with marijuana producer Hydropothecary Corp, betting on a promising market as beer sales stagnate in North America.

The brewer is the latest to capitalize on Canada’s decision to legalize recreational marijuana later in the year, a market industry watchers say could be worth $5 billion to $10 billion.

Last year, Corona beer-maker Constellation Brands Inc became the first major beer and spirits producer to partner with a Canadian marijuana producer, picking up a nearly 10 percent stake in Canopy Growth Corp.

Molson Coors Canada said its joint venture with Hydropothecary, which will make non-alcoholic pot-based drinks, will be a standalone company with its own board of directors and an independent management team.

The deal is expected to close before Sept. 30, just ahead of the proposed legalization of recreational marijuana in Canada. Marijuana products like toffees and drinks are expected to be legalized by 2019.

The Canadian brewer will have a 57.5 percent controlling interest in the venture, with Hydropothecary owning the rest.

Molson Coors, the No. 2 beer maker in North America, has seen global beer volumes fall in the latest quarter. In the United States, volumes dropped 4.8 percent as consumers shift to craft beers and wine.

“There is a paradigm shift underway and cannabis has the potential to provide answers to the alcoholic drinks industry’s existential questions,” said Spiros Malandrakis, head of alcoholic drinks at Euromonitor. (Reporting by Shanti S Nair in Bengaluru Editing by Supriya Kurane and Saumyadeb Chakrabarty)